Buying an investment property

We all have a friend or family member who says that they have “made a fortune” from investing in residential real estate. The theory goes that you buy a house, fill it with tenants and sit back as the rent rolls in. The tenants pay the mortgage or pay for your new lifestyle as a retired landlord. If something sounds too good to be true, it probably is.

We aren't financial investment experts, but there are few things to think about before buying residential property investment:

• Does it meet Healthy Homes standards? If not, do you have funds available to complete work to bring it up to standard?
• Can you meet loan repayments if you don't have tenants? Perhaps you could cover several weeks without a tenant, but don't forget to consider the inevitable rise of interest rates, insurance premiums and council rates.
• What sort of returns are you looking for? Rental income or capital gains?
• What is your “time investment”? Two years, 10 years, 20+ years?
• Are you aware of the tax consequences of being a property investor? This area is constantly changing, so we suggest you contact an accountant for advice.
• Have you factored in all costs - the costs of buying (legal fees, building reports, etc), the ongoing costs of property ownership (council rates, insurance premiums, maintenance, body corporate fees, property management fees) and the costs of selling (legal fees, real estate agent commission, tax, etc)?
• Do you have the time to be a landlord? If not, can you afford to outsource this?

Surround yourself with experts before you take the plunge. Talk to a financial adviser about how residential property investment fits into your overall financial plan, and accountant to help you crunch the numbers and advise on tax, a mortgage broker to help to structure your lending, a property manager to advise on rentability, and (of course) a good lawyer.